The Hurricane Relief – Employee Retention Tax Credit was part of the Disaster Tax Relief and Airport Extension Act of 2017 which was signed into law on September 29, 2017. Many taxpayers are unaware of the tax credit available to business owners that were affected in a federally declared disaster zones by Hurricane Harvey (August 23, 2017), Hurricane Irma (September 4, 2017) or Hurricane Maria (September 16, 2017).
Florida was hit hard by Hurricane Irma and many businesses were affected by the storm. Every county in Florida was listed in the disaster zones.
There is a credit equal to 40% of the “qualified” wages paid up to $6,000 per employee when the wages were paid during a time the business was inoperable as a result of damage sustained by the hurricane. The maximum credit per employee is $2,400. Qualified wages include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed.
Illustration: Employer X is an eligible employer in Florida. There was a power outage at the business location for 10 days as a result of Hurricane Irma. The business operation had to close due to the power outage. The employer has 7 employees and the total wages paid to the employees for the 10 days the business closed were as follows:
Total wages $11,340 x 40% credit = $4,536
The owner is able to claim a tax credit of $4,536 on Form 5884-A filed with the employer’s tax return.
Wages paid to owners, shareholders and partners are not considered “Qualified” wages and are not eligible. However, shareholders of an S Corporation and Partners in a Partnership are entitled to the employee retention credit based on their respective share for the tax credit.
Many of our clients and friends were affected by Hurricanes and had to close operations for a period of time in preparation, during and after the storm. If you are a qualified employer, you may be entitled to the employee retention credit. Please contact us at Jones & Company CPAs P.A. 727.845.4166 if you have any questions regarding the credit.